COMMUNICATION FROM THE COMMISSION - IMPROVING MARKET ACCESS FOR LEAST DEVELOPED COUNTRIES
Date: 1997-04-16
Institutions: European Commission
Subjects: generalised preferences, international trade, least-developed country, market access, trading operation

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  16.04.1997 
COM(97)  156  final 

COMMUNICATION FROM THE COMMISSION 

IMPROVING MARKET ACCESS FOR LEAST DEVELOPED COUNTRIES 

IMPROVING MARKET ACCESS FOR LEAST DEVELOPED  COUNTRIES 

TABLE OF CONTENT 

INTRODUCTION 

•  The Issue 

•  The International  Orientations 

•  The Objectives for Europe 

1. 

EC  TRADE POLICY FOR L L D CS 

1.1.  Market Access conditions 

- 

the  beneficiaries 

-  LOME trade regime for ACP  LLDCS 

-  GSP trade regime applied in practice to non-ACP LLDC  's 

-  overall  assessment 

1.2.  The potential for further  liberalisation 

-  agricultural trade 

- 

take-up of GSP preferences  by non-ACP  LLDCS 

- 

the Green  Paper  on  the  future  of  the  relationship  between  the  EC  and  the 
ACP countries 

2. 

THE  RESULTS  OF THE  MINISTERIAL  CONFERENCE  IN  SINGAPORE  AND  THE  ROLE 
OF THE EC 

2.1.  The WTO Action Plan 

2.2.  The options for  further  improving market access: challenges for the European 

Community 

3. 

CONCLUSIONS /  PROPOSITIONS 

IMPROVING MARKET ACCESS FOR LEAST DEVELOPED COUNTRIES 

INTRODUCTION 

The increasing marginalisation of the LLDCs within the international trade and the 
international trading system has been recognised by the international community  as a 
serious problem.  WTO Ministers in Singapore have agreed upon initiatives that concern 
both the improvement of market access and the coordination of technical assistance by 
adopting a comprehensive Action Plan in favour of the LLDCs and organising a High-
Leve! Meeting for late June. 

The present communication  suggests a long-term strategy for improving the preferential 
market access given by the EC for LLDCs on the basis of the options suggested in the 
WTO Action Plan. The first element of this strategy foresees  the harmonisation  of the 
preferences  given to LLDCs that benefit today of two different  schemes - LOME and 
GSP - and provides for a more flexible  implementation  of the rules of  origin.  Finally the 
option of a consolidated preferential  scheme could be considered at a later stage within 
the next round of tariff  negotiations. 

This document does not deal with the broader question  of technical  assistance needed by 
LLDCs, to enable them  to take better  advantage  of the opportunities  offered  to them by 
trade liberalisation. Initiatives on this front  are the main focus of the High Level Meeting, 
agreed  in the WTO Ministerial  Conference  in Singapore  and  due to take place  later  this 
year in Geneva. 

The  Issue 

1.  The  participation  of  the  LLDCs1  in  international 

trade  and  investment  remains 
worryingly  low.  Against  a  background  of  expanding  world  trade,  both  their  share  of 
total  world  exports  and  the  absolute  value  of  these  exports  have  actually  been 
declining  in recent  years, while  their  imports  have  stagnated.  Given  the declining  share 
in  world  trade,  the  sustained  weakness  of  prices,  and  the  high  price  volatility  of 
primary  commodities,  the continued  dependence  of LLDCs  on  those  products  explains 
a  great  extent  their  poor  export  and  growth  performance  as  well  as  their  economic 
vulnerability.  Similarly  with  investment:  while  the  developing  countries  as  a  whole 
have  seen  their  share  of FDI rise dramatically  in recent  years, this  has  in  the main  been 
directed  to  around  twenty  countries  in  East  and  South-East  Asia  and  Latin  America 
with  the LLDCs  receiving  relatively  little FDI. 

2.  In  terms  of  trade  LLDCs  represent  a  very  small  percentage  of  world  trade,  less  than  a 
half  of  1%  in  1993  (the  latest  year  for  which  full  statistics  are  available).  However, 
this  can  account  for  a  sizeable  share  of  their  foreign  exchange  needs.  LLDCs  exports 
when  expressed  as  a  proportion  of  GDP  represent  9%  of  GDP,  whereas,  imports  are 
the equivalent  of  16%  of  GDP.  Clearly  any  improvements  in  access  to export  markets 
for  LLDCs  would  assist  them  in reducing  this  major  imbalance.  By way  of  comparison 
ODA  represented just  over  8.5% of LLDC  GDP  in  1993. 

The  structure  and  scale  of  imports  from  LLDCs  is  in  part  explained  by  their 
production  structures,  generally  weak,  and  by  the  trade  preferences  they  are  already 
offered  by  the developed  nations. 

imports  from  LLDCs  have  tended 

Developed  country 
to  fluctuate  along  with 
commodity  prices. While  the composition  of  trade  varies  between  LLDCs,  commodity 
exports  are  important  for  most  of  them  with  manufactured  goods  also  of  importance. 
The  degree  to  which  the  latter  is  traded  depends  in  part  upon  the  host  market  and  the 
trade  regime  in place. 

The  International  Orientations 

3.  The  G-7  Leaders,  in  their  1996  Summit  in  Lyon,  recognised  the  seriousness  of  this 
problem  and  focused  particularly  in  the  integration  of  the  least-developed  countries 
into  the  world  economy.  They  recognised  that  all  policy  instruments  -not  only  trade 
policy-  need  to  be  mobilised  to  realise  this  objective  but  they  regarded  improved 
market  access for  LLDCs  exports  as an  important  element  in the process  and  declared: 

"In  this  context,  we  will  examine  what  each  of  us  could  do  to  improve  their  access 
to  our  markets  and  encourage  others  to  do  the  same,  including  other  developing 
countries." 

1 

As  defined  by  the  United  Nations  ' criteria  (listed  in Annexes  I and  II). 

4 

4.  These  ideas  have  been  carried  on  within  the  works  of  the  WTO  and  served  as 
guidelines  for  the  Ministerial  Declaration  in  Singapore  by  which  WTO  Members 
agreed to the following  initiatives concerning the least-developed countries: 

•  "a Plan  of Action,  including provision  for  taking positive  measures, for  example 
duty-free  access,  on  an  autonomous  basis,  aimed  at  improving  their  overall 
capacity to respond to the opportunities offered  by the trading system; 

•  seek to give operational content to the Plan of Action, for example, by enhancing 
conditions  for  investment  and  providing  predictable  and  favourable  market 
access condition  for LLDCs' products, to foster  the expansion  and  diversification 
of  their  exports  to  the  markets  of  all  developed  countries;  and  ir.  the  case  of 
relevant  developing  countries  in  the  context  of  the  Global  Systerr  of  Trade 
Preferences; and 

•  organize a meeting with UNCTAD and the International  Trade Centre as soon as 
possible  in  1997,  with  the  participation  of  aid  agencies,  multilateral  financial 
institutions  and  least-developed  countries  to  foster  an  integrated  approach  to 
assisting these countries in enhancing their trading opportunities." 

The Objectives for Europe 

5.  The  European  Community  has  played  a  very  active  role  in  the  debate  that  was 
launched  in  the  WTO  concerning  the  LLDCs  and  contributed  to  the  successful 
outcome of the Ministerial  Conference.  On this occasion, the Council  has reiterated  its 
political engagement towards the poorest countries by the following  declaration: 

"In  this  context,  the  European  Union  considers  the  Plan  of  Action  submitted  for 
approval  to  the  WTO  Ministerial  Conference  and  contained  in  the  report  of  the 
WTO Committee on Trade and Development  to be a useful  instrument  for  initiating 
further  efforts  to improve market  access of LLDCs. The European  Union  for  its part 
is ready to make commitments  with  a view  to opening further  its market  to  imports 
from  all  LLDCs  and,  in  this  regard,  will  study  in  a constructive  spirit  with  all  its 
partners the different  options advanced  in the plan of action  with  a view to  defining 
in  a  coordinated  way,  in  the  WTO,  concrete  contributions  by  all  involved  for  an 
early  implementation." 

6.  It  is important  not  to over-estimate  the economic  significance  for  LLDCs  of  possible 
improvements  in  access  to  developed  country  markets.  In  the  first  place,  access  is 
already  quite  generous;  in  the  second  place,  production  rather  than  access  is  the 
fundamental  problem  of  these  countries;  finally  LLDCs  also  face  difficulties  to 
respond  to  export  opportunities  because  of  distribution  and  marketing  problems, 
inability to meet  international  standards, etc. However,  trade and  development  should 
not be viewed in isolation and further  opening of the markets should be combined with 
technical assistance in order to help LLDCs to enhance trade opportunities. 

In  this  respect  the  Community  is  working  hard  for  the  success  of  the  High  Level 
Meeting  due  to take  place  in  Geneva  later  this  year.  That  will  focuse  on  a  coordinated 
approach  to  international  technical  assistance,  notably  between  the  activities  of  the 
trade  policy  and  aid  communities.  The  WTO,  the  ITC  and  the  UNCTAD  Secretariats, 
with  the  support  of  World  Bank  and  the  IMF,  are  closely  collaborating  on  concrete 
contributions  that  will  be  discussed  in  the  framework  of  the  WTO  Committee  on 
Trade  and  Development.  The  Community  aims  to  achieve  concrete  results  that  will 
help  meet  the  different  needs  of  the  developing  world  (with  particular  attention  to  the 
training  of  human  resources)  and  will  divide  up  the  tasks  between  the  executive 
agencies. 

In  addition,  helping  LLDCs  to  participate  more  fully  in  the  WTO  and  other  relevant 
institutions,  while  having  a  modest  short-term  economic  impact,  could  be  a  useful 
political  gesture. Within  the WTO  European  Community  support  for  the LLDCs  in  the 
form  of  working  towards  an  initiative  on  market  access  would  be  a  very  important 
political  demonstration  of  our  commitment,  not  only  to  LLDCs,  but  also  to  the 
principle  that  WTO  membership  should  be  beneficial  for  all  its  members.  We  should 
also  press  forward  with  the  idea  of  encouraging  richer  developing  countries  to  open 
their  markets  to  the  least-developed  to  match  what  the  EC  has  already  done,  in  a 
significant  manner. 

I.  EUROPEAN COMMUNITY TRADE POLICY FOR LLDCs 

I I.  MARKET ACCESS CONDITIONS 

The beneficiaries: 

The  European  Scheme  of  Generalised  Preferences  defines  a  list  of  50  least-developed 
countries  (Annex  I)  that  benefit  from  extended  tariff  preferences  for  industrial  and 
agricultural  products, beyond  those available to other GSP eligible developing countries. 
This list is very close to the one established by the United Nations (48 LLDCs: Annex II), 
with two exceptions: under the European  GSP scheme Botswana  and Tonga are eligible 
as LLDCs while Angola is not. 

Of the 50 LLDCs eligible under the European  GSP scheme, 41 are also signatories of the 
LOME Convention  and therefore  benefit  as well  from  the trade conditions  set out  in this 
Agreement.  Of  the  two  schemes,  the  LOME  Convention  is  more  generous  in  terms  of 
markets  access  provisions  and,  as  a  result,  in  practice  only  the  remaining  9  non-ACP 
LLDCs2 receive the extended  GSP preferences.  A detailed  analysis of the two regimes is 
as follows: 

-  LOME Trade regime for ACP LLDCs 

INDUSTRIAL  PRODUCTS: The  Lomé  Convention  gives  free  access  without  quotas  for  all 
industrial  products.  One  result  of  this  regime  is  that  the  EC  is  the  largest  importer  of 
manufactured  goods  from  ACP-LLDCs.  In  1994  the  EC  imported  1.8  Becu  of 
manufactured  goods  from  these  countries.  Total  imports  of  all  industrial  goods  (  NC 
chapters  25-97  including:  oil,  mineral  products  and  base  metals)  amounted  to about  2.9 
Becu in 1994. 

AGRICULTURAL PRODUCTS:  Of the EC's  total  imports of  agricultural  products  from  ACP 
LLDCs (1.3 Becu in  1994) about 97% enter tariff  free due to the LOME trade regime. On 
the  remaining  part  (products  which  are  under  a  Common  Market  Organisation),  most 
imports  receive  some  degree  of  preferential  access  in  the  form  of  an  unlimited  tariff 
preferences  or  in  a few  cases, for  example  fruit  and  vegetable  products,  through  a  tariff 
preference  within  a quota. It should be noted  that the Lomé Convention  also grants duty 
free  access to fish products (Imports of 267 Mecu in  1994). 

2  List  of  non-ACP  Least  Developed  Countries:  Yemen,  Afghanistan,  Bangladesh,  Maldives,  Nepal, 

Bhutan,  Myanmar, Laos,  Cambodia. 

To  be  noted  that  the  Commission  has  proposed  to  the  Council  to  withdraw  the  GSP  preferences  for 
Myanmar  for  violation  of the international  conventions  concerning  the prohibition  of forced  labour. 

SPECIAL  PROTOCOLS:  In  addition  to  the  general  Lomé  trade  regime,  the  Lomé  protocols 
offer  additional  benefits  to  some  ACPs.  One  ACP  LLDC,  Madagascar,  enjoys  under  the 
beef  and  veal  protocol,  a reduction  of  92%  of  the  specific  duties  (ad  valorem  component 
of  the  tariff  is  waived  for  all  ACPs)  for  its  exports  of  boneless  beef  to  the  EC  within  an 
annual  quota  of  7579  tons.  Moreover,  four  ACP  LLDCs  -Madagascar,  Malawi,  Uganda 
and  Tanzania-  benefit  under  the  Sugar  protocol  from  the  selling  to  the  EC  at  guaranteed 
prices  of  specific  but  different  annual  quantities  of  sugar  (10000,  20000,  5000  and  10000 
tonnes, respectively). 

-  GSP Trade regime  applied  in practice  to non-ACP  LLDCs 

Non-ACP LLDC  countries  benefit  from  a special  GSP regime under  which: 

INDUSTRIAL  PRODUCTS:  Duty  free  access  is  provided  for  practically  all  manufactured 
exports  to  the  Community.  The  only  exclusions  are  some  primary  products  and  non-
ferrous  metals3.  However  in  reality  these  exclusions  touch  very  little  of  the  non-ACP 
LLDCs  actual  trade  with  the  European  Community.  Acccording  to  1994  figures  the  only 
imports  of  industrial  products  which  are  not  eligible  for  tariff  preferences  were  around  7 
MECU  (Annex  III). Moreover,  they concerned  leather  imports  for  which  the  MFN  duties 
will  be reduced,  as a result  of the Uruguay  Round. 

In  the  textiles  and  clothing  sector  LLDCs  also  benefit  from  a duty  free  treatment  (which 
is  not  the  case  of  the  other  major  textiles  importer,  the  US  which  does  not  grant  GSP 
benefits  at all  for  textiles  and  clothing  exports). 

is  provided  for  practically  all 
AGRICULTURAL  PRODUCTS:  Duty  free  access 
agricultural  products,  with  the  exception  of  most  products  which  are  under  a  Common 
Market  Organisation.  Again,  these  exclusions  concern  very  little  of  actual  trade.  Under 
the  revised  GSP  which  came  into  force  in  1997,  it  is  estimated  that  only  0.2  Mecu  of 
1994 agricultural  trade  with  non-ACP  LLDCs  is not  eligible  for  preferential  treatment.  In 
fact  the  Community  has  already  made  an  effort  to  include  more  agricultural  products 
under  preferences  since  under  the  old  GSP  and  1994  figures  3  MECUs  of  agricultural 
imports  were  not eligible  for  preferential  access. 

-  Overall  assessment 

The  EC  through  Lomé  and  its  generous  GSP  for  industrial  goods  is  supportive  of 
manufacturing  in  LLDCs.  As  a  result,  the  Community's  imports  from  LLDCs  contain  a 
higher  share  of  manufactured  products  notably  textiles  and  clothing  than  do  the  other 
Quad  members.  To  give  the  most  stark  example,  in  1995  the  EC  imported  $3.5  bn  of 
manufactured  goods  from  LLDCs  compared  with  $1.5  bn  of  imports  by  the  US  and  $0.06 
bn  by  Japan  (Annex  IV).  Of  the  QUAD  it  is  the  Union  which  has  the  highest  share  of 
imports  of  manufactured  goods  in  its total  imports  from  non-ACP  LLDCs. 

Although  the  agricultural  products  do  not  benefit  from  the  same  generous  conditions  as 
industrial  ones,  the  European  Community  still  has  better  results  than  the  other  QUAD 
countries.  This  is  true  in  absolute  terms  of  the  value  trade,  but  also  in  relative,  the 
European  Community  importing  from  the LLDCs  ± 4% of its total  agricultural  imports. 

Annex  IX  of  the  GSP  regulation  (EC)  n°  3281/94 

However,  more  needs  to  be  done  across  the  board  to  expand  the  potential  market 
available  to  LLDC  exporters.  The  European  Community  is  well  placed  to  call  for 
improved  treatment  for  LLDCs  by virtue  of  the efforts  which  we have  made  to  date. In 
this  effect,  the  results  of  the  High  Level  Meeting  on  technical  assistance  will  be 
extremely useful  in helping LLDCs to avail of the opportunities  offered. 

1.2.  THE POTENTIAL FOR FURTHER  LIBERALISATION 

-  Agricultural trade 

At present very little of the EC's agricultural trade with the LLDCs does not receive some 
sort  of  preference.  However,  the  specific  products  not covered  by  any preferential  trade 
represent  several  hundreds  of  tariff  lines.  The  potential  results  of  the  liberalisation  for 
these  products  are highly  unpredictable.  Under  most  of  the  headings  concerned  LLDCs 
export nothing to EC. It is difficult  to say if this is primarily because of our protection  or 
whether LLDC would in any case be uncompetitive in these products. 

It is true that  an analysis  of  the effects  of  lifting  restrictions  is difficult  but  any concern 
about  the  EC  market  being  "flooded  with  imports"  must  be  seen  in  the  light  of  the 
LLDCs potential  to expand exports  in the future.  In the short term  at least, this potential 
would appear very limited: 

•  Total  agricultural  production  of  the  LLDCs  is  around  40  Becu  (1993  figure4). 

(P.M. roughly equal to two-thirds of EC's annual agricultural  imports) 

•  In  1994 LLDCs agricultural exports to the Quad totalled approximately 5.2 Becu. 
Even  if  twice  this  amount  were  exported  to  the  EC  alone,  it  would  amount  to 
about 7.7% of the EC's total agricultural imports. 

•  Furthermore, any increased export potential  which might be developed  as a result 
of  the  lifting  of  restrictions  would  develop  over  the  medium  to  long  term  and 
would  not  be concentrated  on  the  EC  alone. The  Singapore  Declaration  implies 
that  Quad  but  also  other  developed  and  developing  WTO  Members  must  also 
look  to  liberalise  their  trade  and  other  markets  with  higher  levels  of  protection 
(i.e.  Japan)  would  be  more  likely  to  witness  a  large  increase  in  imports  from 
LLDCs. (P.M. the EC already has  the highest  share  and  value of  LLDC  imports 
in its total agricultural  imports.) 

4 

calculation based on data in UNCTAD Yearbook  1994 

9 

There  are nonetheless  some  products  where  the potential  to expand  production  to  levels 
which  might  create  difficulties  on  the  European  market  (if  production  were  converted 
into  exports  to  the  EC).  Rice,  bananas,  manioc  and  bovine  meat  are  perhaps  the  most 
obvious  examples.  Current  imports  from  LLDCs  of  these  products  vary  greatly  in 
magnitude: 48 Mecu  for  bovine  meat,  10.3 Mecu  for  bananas  6.5  Mecu  for  manioc  and 
for rice just  50,000 Ecu. However, the concern  is that production  of these products could 
be  rapidly  increased  if  liberalisation  took  place:  witness  the  increase  in  production  of 
manioc following  liberalisation  agreed during the Kennedy Round5. 

Any  package  of  liberalisation  measures  should  contain  adequate  safeguard  mechanisms 
to protect  against unforeseen  surges  in trade. A liberalisation  package could  for  example 
include  duty-free  treatment  for  some  agricultural  products  but  subject  to  quantitative 
limits (as is the case for certain  products under the LOME Convention), or could  foresee 
gradual liberalisation  by stages before  arriving at total exemption  of duties. It should also 
be possible  for  the  EC  on  the  basis  of  the  current  understanding  of  LLDCs'  production 
capability  and  with  some  further  analysis  to  draw  up  a  short  list  of  products  to  be 
excluded  from  any liberalisation  package. Thus protected  the EC would  be in  a position 
to advance the case  for  preferential  liberalisation  for  LLDCs  in the  agricultural  sector at 
the WTO. 

-  Take up of GSP preferences  by non ACP-LLDCs: 

Rules of origin 

In practice, it is difficult  for non ACP LLDCs to benefit  from  these generous  access 
conditions,  the  most  frequently  quoted  reason  being  the  complex  rules  of  origin 
requirements.  In  fact  non  ACP-LLDCs  face,  within  the  GSP  scheme,  non-flexible 
rules  of  origin  such  as the double  transformation  requirement  in  the textiles  sector. 
ACP-LLDCs  also  face  the  double  transformation  requirement  but  benefit  from  the 
possibility  of cumulation  between  ACP and E.U. countries. Other GSP countries do 
benefit  from  the  possibility  of  cumulation  with  the  E.U.  countries  but  on  an 
individual  basis while cumulation  between  them  is not foreseen,  with  the exception 
of certain cases of regional cumulation  (ASEAN). 

The purpose of the specific  rules of origin  is justified  by the necessity to make sure 
that the benefits  of the scheme effectively  apply to the GSP beneficiaries  and help to 
attract  and  maintain  investment  within  those  countries  who  mostly  need  it.  A 
relaxation  of  these  rules  may  lead  to  the  development  of  economic  activities  that 
produce very little or no value added at all. 

For a broad sectoral  analysis of the agricultural  potential of the LLDCs, including  fruit  and  vegetables, 
fats and oil and dairy products, see annex V. 

10 

In  1994, the  latest  year  for  which  data  is  available,  EU  preferential  treatment  was 
claimed  for  41.2  percent  of  textile  and  clothing  imports  from  non-ACP  LLDCs; 
therefore  the  remaining  58.8  percent  had  to pay  the  normal  MFN  rate,  which  is in 
the vicinity of  12-13 percent at the moment. As textile and clothing imports account 
for  more than  60 percent  of  all  our  imports from  non-ACP LLDCs, the  importance 
of rules  of  origin  requirements  is evident.  Laos, Cambodia,  Bangladesh  and others, 
which  encounter  difficulties  with  these  specific  rules  of  origin  for  a  part  of  their 
exports  have  consequently  introduced  a  request  for  a  derogation  (as  foreseen  in 
Regulation (CE) n° 2454/93) in order to be able to export on preferential  terms. 

Consideration  should  be  given,  therefore,  to  improving  the  rules  of  origin.  This 
improvement should be in two forms: 

-  simplification,  in  which  the  first  stage  would  be  the  derogations,  as  well  as  the 
application  of  existing  regional  cumulation  facilities  for  the  benefit  of  LLDCs 
and 

-  clarification  of  the  conditions  for  applying  preferences  in  practice  (fraud, 

discrepancies). 

For the latter point, the Commission  will put forward,  presently, its understanding of 
the situation  and will propose methods for  avoiding these difficulties;  this would be 
in  the  interests  of  the  beneficiary  countries  (preventing  other  countries  from  using 
preferences  in their stead), of Community  importers (responsible for paying customs 
duties) and of safeguarding  the Community's own resources. 

Only  with  these  conditions  can  the  rules  of  origin  be made  more  flexible,  without 
making the preferences  more cumbersome to apply. 

Other  factors  which  might  affect  the  level  of  preferential  access  to  our  market  for 
non-ACP LLDCs are: 

• 

incomplete coverage of our GSP scheme. Only 0.45% of  1994 imports from  non-
ACP  LLDCs  do  not  receive  preferential  treatment.  However,  the  effects  of 
granting preferences  for the products not already  included  in the GSP scheme on 
potential  trade  are  difficult  to  quantify.  For  certain  cases  the  effect  might  be 
limited  since  no  sufficient  production  exists.  In  other  cases  further  preferences 
may incite an increase on production. 

•  under-utilisation of GSP: there are also sectors where the utilisation  of the GSP is 
rather  low  (for  example  only  two-thirds  of  non-sensitive  industrial  products 
imported, receive preferential  treatment), whether because the preferential  margin 
is too small  because they are not aware of the possibility of claiming  preferential 
the  necessary 
treatment,  or  because  the  administrative  cost  of  following 
procedures is too high. 

11 

-  The  Green  Paper  on  the  future  of  the  relationship  between  the  EC  and  the  ACP 

countries 

The  present  Lomé  Convention,  which  includes  the  trade  regime  the  EC  applies  to  the 
ACP  countries,  expires  on  February  2000.  In  order  to  prepare  for  negotiations  on  the 
relationship beyond that date, which have to start in  1998, the Commission  has sent to the 
Council  a Green  Paperhe  future  of  these  relations  (Doc. N° 262/96  (ACP)). This  Green 
Paper  is  intended  to  lead  to  a  large  debate  inside  the  Community  and  in  the  ACP 
countries  as well  as between  all  other concerned  people  about  the options  which  appear 
open  in  the  beginning  of  the  next  century.  As  such,  the  Green  Paper  only  presents  the 
different  possible options, without engaging the EC, at this stage, in favour  of a particular 
one.  The  Commission,  however,  will  have  to  define,  in  the  light  of  the  results  of  the 
debate,  the  options  to  follow  later  in  this  year,  when  it  has  to  present  to  the  Council  a 
proposal for negotiating directives with the ACP States. 

In the trade field, the Green Paper presents three basic options for the future: 

•  a reciprocal  trade agreement  or several  reciprocal  agreements  in conformity  with 

GATT/WTO rules; 

•  keeping the ACP countries only under GSP treatment; 

•  or maintaining the present features of the trade regime with some improvements. 

Each  of  these  three  basic  options  will  have  different  implications  for  the  future 
commercial  treatment  of the ACP countries  and consequently  of the LLDCs, since 41 of 
the 49 ones on the UN list are ACP States. The Green  Paper also mentions the option of 
unifying  the trade treatment  for  all  LLDCs  by including  in the future  trade deal  the  nine 
LLDCs which are not ACP. 

*  *  * 

12 

2.  THE  RESULTS  OF  THE  MINISTERIAL  CONFERENCE  IN  SINGAPORE 

AND THE ROLE OF THE EUROPEAN  COMMUNITY 

2.1.  THE WTO ACTION PLAN 

The  Ministerial  Declaration  in  Singapore  clearly  defines  as  an  essential  objective  the 
integration  of  the  Least-Developed  Countries  in  the  multilateral  environment  that  has 
emerged  from  the  Uruguay  Round  negotiations.  In  order  to  fulfil  this  objective  WTO 
Members have adopted a Comprehensive  and Integrated  WTO Action Plan  for the Least-
Developed Countries. Therefore, WTO Members recognised that although the reasons for 
the  LLDCs  marginalisation  may  lie  with  the  incapacity  of  their  economic  structures  to 
produce  and  export,  policies  applied  by  the  developed  and  developing  economies  may 
help the poorest  countries  to take  advantage  of the trading  opportunities  that  are  offered 
and attract  investment. 

The  WTO  Action  Plan  covers  measures  and  suggests  options  that  aim  not  only  to 
improve  the  trading  performance  of  the  LLDCs  but  also  their  better  integration  and 
participation  in  the  multilateral  trading  system.  Therefore  it  covers  in  a  comprehensive 
approach  the effective  implementation  of  the Decision  on  Measures  in  Favour  of  Least-
Developed  Countries  with  steps  that  have  to  be  taken  in  the  multilateral  context  within 
the various WTO Bodies and Committees. 

Secondly, the WTO Action  Plan deals with the area of Human  and Institutional  Capacity 
Building  underlining  the  need  of  cooperation  between  the  WTO  Secretariat  and  other 
international  institutions in matters of technical assistance. 

Finally,  in  terms  of  improving  market  access,  the  WTO  Action  Plan  suggests  various 
options to be considered by WTO Members, in order to take initiatives on an autonomous 
basis.  As  such  the  dispositions  of  the  WTO  Action  Plan  on  market  access  represent 
suggestions for voluntary contributions. 

In the market access area the WTO Action  Plan  introduces two qualitative elements to be 
taken into account: 

* 

a multilateral  approach: 

As  such,  the  WTO  Action  Plan  already  constitutes  a  framework  for  multilateral 
coordination  of  autonomous  actions  taken  by  WTO  Members  and  it  is  mentioned  that 
"Further consideration  should  be given  to additional  multilateral  action  and  coordination 
in this endeavour".  Moreover, in Part  IV it is also suggested  that  individual  members may 
study  the  feasibility  of  binding  a  multilateral  preferential  scheme  to  be  applied  only  to 
LLDCs. 

* 

burden sharing: 

According  to  the  Action  Plan,  not  only  developed  but  also  developing  countries  would 
explore the possibility  of granting preferences  to the LLDCs. The Plan  does not give any 
objective  as  to  the  extent  of  these  preferences  but  provides  for  the  possibility  of 
exceptions. 

13 

2.2. 

THE OPTIONS FOR FURTHER IMPROVING MARKET ACCESS: 
CHALLENGES FOR THE EUROPEAN  COMMUNITY 

If  least-developed  countries  are to  diversify  their  exports  base  and  reduce  their  reliance 
on exports of primary products they need to face  international  trading environment  which 
is conducive to this process. 

The  different  options  suggested  by  the  Action  Plan  on  market  access  constitute  a  basis 
upon  which the European  Community,  along with  other WTO Members, can construct a 
multilateral  strategy  in order to fulfil  the objectives  designed  by the Council  Declaration 
on LLDCs. 

In order to be in the strongest  possible position  to provide the opening of the markets  for 
LLDCs'  exports  in  other  developed  and  more  advanced  developing  countries,  the 
European Community  should itself take further  steps towards trade  liberalisation. 

a)  "Developed  country  Members  and  developing  country  Members,  on  an 
autonomous  basis,  would  explore  the  possibilities  of  granting  preferential  duty 
free access for the exports of least-developed  countries. In both cases, exceptions 
could be provided for." 

Preferential  duty-free  access: 

The establishment  of duty free  access for  all  imports  coming  from  LLDCs does not 
have  the  same  economic  and  legal  consequences  for  industrial  and  agricultural 
products either for ACP or for non-ACP LLDCs. 

For  industrial  products,  establishing  free  access  will  mean  that  non-ACP  LLDCs 
will  benefit  from  the  same conditions  as  ACP  ones  and  will  concern,  according  to 
1994 figures, 7 MECUs of trade. 

For  agricultural  products,  establishing  duty-free  access  will  mean  that  all  LLDCs 
will  see  their  preferences  improved  further  than  those  foreseen  by  the  LOME 
Convention, or the GSP scheme. 

Leaving  apart  the  already  explained  risks  of  a further  agricultural  liberalisation  and 
the  need  for  exceptions  there  are  also  further  problems,  that  are  linked  with  the 
contractual character of the Lomé Convention. 

Contrary  to the GSP, trade preferences  granted  to  ACP countries  arc established  in 
the Lomé Convention  which  is a contractual  agreement  between  all  the  signatories. 
One of its basic principles in the trade field  is the non discrimination  clause between 
ACP  countries  as  provided  for  in  article  174,  b)  of  the  Convention  ("The 
Community  shall  not  discriminate  between  ACP  states  in  the  field  of  trade"). This 
makes  it  legally  impossible  for  the  Community,  as  long  as  the  present  Lomé 
Convention  is  in  force,  to  extend  the  scope  of  trade  preferences  for  ACP  LLDCs 
without extending them, at the same time, to the other 29 ACP countries, which will 
go well beyond the intended EC action in this document. 

14 

As  stated  earlier,  the  present  Lomé  Convention  expires  in  February  2000.  In  the 
meantime, the EC could extend to the non-ACP LLDCs trade preferences  equivalent 
to those  granted  to  the  ACP  countries;  this  would  require  quotas  and  calendars  for 
the  imports  of  some  sensitive  agricultural  products  which  are  granted  preferential 
access within quotas and calendars in the Lomé trade regime. 

Those  sensitive  agricultural  concessions,  which  are  granted  under  Lomé  special 
protocols  and  Lomé  quotas  (sugar,  bananas,  rice,  rhum,  veal  and  beef)  and  only 
apply  to  a  handful  of  ACP  countries,  should  not  be  extended  to  the  non-ACP 
LLDCs. 

Rules of origin 

Improving  market  access  does  not  only  mean  applying  zero  tariffs  and  eliminating 
quantitative  restrictions  but  also  facilitating  the  access  of  LLDCs  to  these  open 
conditions. 

Where the European  Community could make real progress  is in the area of  rules of 
origin,  which,  as  described  above,  limit  the  accession  of  non-ACP  LLDCs  to  the 
GSP preferences.  However,  any  improvement  in  the  field  of  rules  of  origin  should 
be  carefully  geared  so  as  to  make  sure  that  it  contributes  to  achieve  the  right 
objective,  that  is  the  development  of  the  existing  industrial  infrastructure  and  the 
creation of new industries  in the beneficiary  countries. In order to avoid the risk that 
other-countries  try to take undue advantage from  any further  concession  appropriate 
administrative  instruments  (i.e.  bilateral  textile  monitoring  agreements  with  non-
WTO  countries  or  administrative  arrangements  on  textiles  trade,  as  well  as  the 
reinforcement  of  the  customs  cooperation  mechanisms)  should  be  considered  as 
useful  or necessary accompanying measures. 

Solution could be sought  in the direction  of providing for  regional  cumulation  (as it 
is the case for example for ASEAN and as it could be the case for SAARC6). This is 
already  foreseen  in  the  framework  of  the  derogations  the  Commission  is  going  to 
propose  to  the  Customs  Code  Committee."  Moreover,  this  will  also  encourage  the 
process of regional  integration  between  LLDCs and developing countries that is one 
of the objectives of the Community's development policy. 

Participation  of other WTO Members 

As  mentioned  in  the  Action  Plan,  developed  and  developing  Members  could 
contribute  to  improving  market  access  for  the  least-developed.  In  fact,  developing 
countries  and  least-developed  ones do give preferences  to each  other  in the context 
of  regional  integration,  that  is  on  a  reciprocal  basis.  The  establishment  of  non-
reciprocal,  non-discriminatory  autonomous  preferences 
to  LLDCs  given  by 
developing  countries  should  not  have  a  negative  effect  on  the  process  of  regional 
integration. 

6  ASEAN: Association of South East Asian Nations 

SAARC: South Asia Association for  Regional Cooperation 

15 

Developing  countries,  and  especially  the  more  advanced  among  them7,  should 
participate  but  according  to  the  level  of  their  development.  For  example,  the  degree 
of  exceptions  in  their  preferential  schemes  could  be  greater  than  in  the  case  of 
developed  countries.  This  could  diminish  any  conflict  between  autonomous 
preferences  and  regional  integration  since  in the  latter  case, the  coverage  of  products 
will  be  larger.  The  establishment  of  preferential  autonomous  schemes  can  even  be  a 
motivation  for  joining  a  free  trade  area  which  will  give  the  opportunity  for  the 
joining  partners  to  achieve,  further  liberalisation  than  they  would  receive  under  the 
preferential  schemes. 

b)  WTO  Members  should  endeavour  to  make  use,  when  possible,  of  the  relevant 
provisions  of  the  Agreement  on  Textiles  and  Clothing  to  increase  market  access 
opportunities  of least-developed  countries. 

The  European  Community  does  not  apply  any  quantitative  restrictions  to  textile 
products  originating  in  the  least-developed  countries.  Within  the  Textiles  and 
Clothing  Agreement  the  European  Community  has  only  one  bilateral  Agreement 
with  Bangladesh  that concerns  a monitoring  system. 

Moreover,  LLDCs  benefit  from  tariff  preferences  for  all  textile  products  in  the 
context  of the LOME  Convention,  and under  the GSP  scheme. 

As  is  the  case  with  imports  of  manufactured  goods  as  a  whole,  the  openness  of  the 
EC  trade  regime  with  regards  to  imports  of  textiles  and  clothing  from  LLDCs  has 
been  beneficial.  In  terms  of  absolute  value  and  share  of  imports  in  the  sector  the  EC 
is the  most  important  of the QUAD  market  for  LLDCs. 

The  European  Community  can  legitimately  fix  as  an  objective,  in  the  multilateral 
context,  liberalisation  measures  to  be  taken  by  the  other  developed  countries  who 
maintain  bilateral  textile  agreements  imposing  quantitative  restrictions.  On  the  same 
occasion  the  European  Community  could  seek  improvements  of  the  preferential 
schemes  applied  by  other  WTO  Members  by  extending  the  coverage  to  textile 
products. 

However,  the  abolition  of  quantitative  restrictions  for  textile  products  originating  in 
least-developed  countries  might  provoke  reactions  from  textile exporting  developing 
countries,  for  which  quantitative  restrictions  will  remain.  These  last  ones  may  argue 
that  the  maintenance  of  quotas  for  their  textiles  products  puts  a  ceiling  on  their 
market  share,  and  artificially  create  a  market  space  for  the  LLDCs'  products  for 
which  quotas  are  abolished. 

7 

For example, countries  listed  in the  Annex  VII  of the GSP  regulations. 

16 

c)  "Whenever  provided  for  in  the  WTO  Agreements,  Members  may  decide  to 
extend  unilaterally  and  on  an  autonomous  basis,  certain  benefits  to  least-
developed countries' suppliers." 

The  European  Community  could  examine  if,  in  the  case  of  the  Agreement  on 
Government  Procurement,  the  market  opening  benefits  could  be  extended  to 
suppliers  in  LLDCs,  whether  or  not  they  are  a  Party  of  the  Agreement.  This 
extension  should be done on an autonomous basis and would be not legally binding. 
It could constitute a bilateral or a multilateral action if other WTO Members agree to 
do so. 

d) Part IV point 17 of the WTO Action Plan: 

"Individual  Members  may  study  the  feasibility  of  binding  preferential  tariff 
rates  in  the  WTO  preferential  scheme  which  could  be  applicable  to  least-
developed countries only." 

Binding  preferential  rates  for  LLDCs  would  introduce  an  element  of  stability  and 
predictability  for LLDCs'  exports that might  attract  investment  and allow  long-term 
planification.  On  the  other  hand,  it  would  introduce  an  element  of  rigidity  for  the 
donor country. In fact, tariff  preferences  would not be given on an autonomous basis 
but would constitute  a bound obligation.  In a bound  preferential  scheme neither  the 
list of the products nor the rates, nor the beneficiaries  may be  modified.8 

the 
Therefore,  bound  preferences  would  contribute,  by 
development process, but, on the other hand, they would not allow the doner country 
to use them for development policy purposes. 

their  stability, 

to 

The establishment  of  a WTO preferential  scheme  would  have  a meaning  only  if all 
non-LLDCs members would make such a commitment. Of course, the degree of the 
engagements and the timing might vary according to the level of development  of the 
donor. 

However,  there  are  also  questions  relative  to  the  WTO  legal  basis  for  a  non-
autonomous  preferential  scheme  that  would  be  a  bound  exemption  to  the  most-
favoured  nation  treatment.  All  this  will  require  a strong  political  initiative  that  will 
be opposed by many WTO members. In fact, the other QUAD Members have already 
shown  great  reluctance  in  moving  towards  a further  opening  of  the  markets  for  the 
LLDCs. This reluctance was turned  into a total  negative attitude to the suggestion of 
a  bound  preferential  scheme  for  market  access.  Too  much  insistence  for  a  binding 
scheme, at this stage, will undermine the few  advances that could be made in  further 
opening of the markets on an autonomous basis. 

As  it  is the case  today,  for  example  for  Myanmar,  for  which  GSP  preferences  will  be  withdrawn  for 
violation of the international conventions concerning the prohibition of forced  labour. 

17 

Finally,  a binding  preferential  scheme  applicable  only  to  least-developed  countries 
would  constitute  a consolidated  concession.  As  such  it  is  no  more  a  benefit  given 
unilaterally  by  a  donor  country,  but  a  part  of  the  general  balance  of  rights  and 
obligations of the WTO members as a whole. 

For  all  these  reasons,  the  idea  of  a  binding  preferential  scheme  would  be  best 
considered only in the context of the next round of negotiations  as a possible part of 
the concluding package. 

III.  CONCLUSIONS /  PROPOSITIONS 

The European  Community  gives  a priority  to the  issue of  least-developed  countries  and 
has fixed  as  an  objective  to contribute  to  their  integration  in  the  international  trade  and 
trading  system.  Within  the  multilateral  framework,  the  European  Community  has 
supported  the  WTO  Comprehensive  Action  Plan  as  well  as  the  organisation  of  a High 
Level  Meeting  for  the  coordination  of  the  technical  assistance,  in  order  to  help  them 
benefit from  the opportunities that trade liberalisation  is  offering. 

For  Europe,  trade  and  development  aspects  are  strongly  linked  and  this  linkage  is 
expressed  within  the  policy  applied  towards  the  poorest  countries.  Therefore,  any 
initiative  or  reorientation  of  the  preferences  given  to  the  LLDCs  has  to  be  taken  in 
harmony  with  the general  evolution  of  the European  development  policy.  Any  initiative 
for  the  least-developed  countries  has  to  take  into  consideration  the  fact  that  the  Lomé 
Convention,  that  covers  not  only  LLDCs  but  other  developing  countries,  will  expire by 
the year 2000. 

In the light of the analysis made in the present  Communication,  the trade regime already 
applied  by  the  European  Community  seems  quite  generous  but  margins  for  further 
liberalisation  still exist. These margins concern  limited  amounts of current trade but it is 
difficult  to estimate the effect  that trade liberalisation  will have on trade flows, especially 
as most of the products for which restrictions and tariffs  still exist are agricultural ones. 

The Commission  therefore  suggests  to the Council  to adopt  a long-term,  staged  strategy 
with initiatives that: 

-  would  aim to give all  LLDCs  a similar  preferential  treatment  and equal  opportunities 

to the Community  market; 

-  would  be  on  an  autonomous  basis  but  coordinated  and  valorised  on  the  multilateral 

context; 

-  would  use  the  possibilities  offered  already  by  the  Community's  preferential  trade 

policy instruments. 

18 

In  the  short  term  the  European  Community  should  present,  within  the  Committee  on 
Trade and Development, autonomous initiatives in the following areas: 

- 

the harmonisation  of the European  Community's  preferential  trade policy towards the 
least-developed  countries. This can be realised in the short term by adjusting  the trade 
regime  given  to  all  LLDCs  to  the  level  of  the  LOME  tariff  preferences,  with  certain 
exceptions  for  sensitive  products,  notably  agricultural  products  under  Lomé  quotas 
and Lomé protocols; 

-  as far  as rules of origin  are concerned, the Community  could  promote  the  application 
of existing  regional  cumulation  facilities  for  the benefit  of  least-developed  countries; 
should give positive answers to the derogations requested  by certain  LLDCs; while in 
the near future,  a specific  Communication  to the Council  could  contribute,  inter  alia, 
to the clarification  of the conditions of applying preferences  in practice. 

On  the  basis  of  these  initiatives  the  European  Community  should  call  upon  the  other 
WTO  members, 
further 
improvements on the basis of the WTO Action  Plan for further  opening of their  markets 
that should be comparable to the ones already realised by the EC. 

including  advanced  developing  countries, 

to  present 

Finally,  the  idea  of  a binding  preferential  scheme  would  be  best  considered  only  in  the 
context of the next round of negotiations as a possible part of the concluding package. 

19 

List of least-developed developing countries 

ANNEX I 

Sudan 

Mauritania 

Mali 

Burkina Faso 

Niger 

Chad 

Republic of Cape Verde 

Gambia 

Guinea-Bissau 

Guinea 

Sierra Leone 

Liberia 

Togo 

Benin 

Central African Republic 

Equatorial Guinea 

Sâo Tome and Principe 

Zaire 

Rwanda 

Burundi 

Ethiopia 

Eritrea 

Djibouti 

Somalia 

Uganda 

Tanzania 

Mozambique 

Madagascar 

Comores 

Zambia 

Malawi 

Botswana 

Lesotho 

Haiti 

Yemen 

Afghanistan 

Bangladesh 

Maldives 

Nepal 

Bhutan 

Burma (Myanmar) 

Laos 

Kampuchea (Cambodia) 

Solomon Islands 

Tuvalu 

Kiribati 

Vanuatu 

Tonga 

Western Samoa 

Angola 

do 

UN Definition of Least Developed Countries 

ANNEX II 

Least Developed Nation status is conferred  upon states by the United Nations General Assembly 
on the recommendations  of the Committee for Development Planning through ECOSOC. 

The list of LDCs as well as the criteria are reviewed every three years - the next review  is due in 
1997. 

The criteria are as  following: 
Î) per capita GDP 
2) augmented physical quality of life  index (APOLI) comprising four indicators: 

life expectancy  at birth, per capita calorie supplies, combined primary  and secondary 
enrolment ratio, and adult literacy rate 

3) an economic diversification  index comprising: 

the share of manufacturing  in GDP, the share of employment in industry, per capita 
electricity consumption and an export concentration  ratio. 

UN List of Least Developed  Countries 

Afghanistan 

Angola 

Bangladesh 

Benin 

Bhutan 

Burkina Faso 

Burundi 

Cambodia 

Gambia 

Guinea 

Guinea-Bissau 

Haiti 

Kiribati 

Lao People's Democratic 
Republic 

Lesotho 

Liberia 

Cape Verde 

Madagascar 

Central African  Republic 

Malawi 

Chad 

Comoros 

Maldives 

Mali 

Djibouti 

Mauritania 

Equatorial Guinea 

Mozambique 

Eritrea 

Ethiopia 

Myanmar 

Nepal 

Niger 

Rwanda 

Samoa 

Soa Tome and Principe 

Sierra Leone 

Solomon  Islands 

Somalia 

Sudan 

Togo 

Tuvalu 

Uganda 

United Republic of 
Tanzania 

Vanuatu 

Yemen 

Zaire 

Zambia 

àl 

EC Imports from non-ACP LLDCs 1  not receiving preferential  treatment, 
1994 (thousand ECU) 

A N N EX in 

»2 

41061900 

Goat or kid skin leather, other 

41061200 

Goat  or  kid  skin  leather,  otherwise  pre-
tanned 

41051990 

Sheep or lamb skin, other, split 

41051910 

Sheep or lamb skin, other, not split 

07032000 

Garlic 

41061190 

Goat  or  kid  skin  leather,  vegetable  pre-
tanned. other 

41051210 

Sheep  or 
tanned, not split 

lamb  skin,  otherwise  pre-

41041091 

Leather, not further  prepared than tanned 

485 

226 

118 

58 

39 

35 

2.2 

2.2 

11.6 

2.4 

2.2 

6.7 

10.8 

2 

2 

9.6 

2 

6.5 

10063025 

Semi or wholly milled rice 

25  611 ECU / ton  533 ECU / ton 

416 ECU/ton 

1  Yemen, Afghanistan.  Bangladesh, Maldives. Nepal. Bhutan, Myanmar, Laos, Cambodia 

2 

Industrial products:  1  January  1999 

Agricultural products:  1  July 2000 (if not other  specified) 

So 

10063044 

Semi  or wholly  milled  rice 

14 

611 E C U / t on 

533  E C U / t on 

416  E C U / t on 

02013000 

Boneless  meat 

41072910 

Other  leather 

17039000 

Molasses,  other 

10063094 

Semi  or wholly  milled  rice 

10063063 

Semi  or wholly  milled  rice 

10063092 

Semi  or  wholly  milled  rice 

10 

18.8 + 445.6 

16.4 +  388.7 
E C U/  100 Kg  E C U/  100 Kg 
/net 

12.8 + 303.4 ECU / 1 00  Kg 

2.5 

43  E C U / 1 00 
Kg 

0.4  ECU  /  100 
Kg /  net 

611 E C U / t on 

533  E C U / t on 

611 E C U / t on 

533  E C U / t on 

611 E C U / t on 

533  E C U / t on 

0.35 E C U / 1 00  Kg 

416  E C U / t on 

416  E C U / t on 

416 ECU  /ton 

TOTAL  without  preferences 
TOTAL  IMPORTS 

7,320 
1,624,477 

Industrial  products:  1  January  2000 

Agn;u'Uirai  products:  i July  2000  ut  not  other  specified) 

So 

TOTAL IMPORTS FROM LEAST DEVELOPED COUNTRIES TO QUAD 

European Community  (15) 

US 

Value(000 Ecu)  Share (%) 

Value(000 Ecu)  Share(%) 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

7833161 
7552554 
6509104 
6418896 
5682344 
6373539 
7199627 

1,8028 
1,6986 
1,3753 
1,3787 
1,1946 
1,2232 
1,3217 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

3924983 
3614505 
3195236 
3429351 
3771629 
3893464 
3807810 

0,8771 
0,8894 
0,7780 
0,8043 
0,7322 
0,6722 
0,6461 

JAPAN 

CANADA 

Value(000 Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

1326159 
981687 
992215 
909998 
1111100 
1057997 
1207520 

0,6930 
0,5324 
0,5194 
0,5069 
0,5406 
0,4581 
0,4699 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

215209 
160619 
196469 
155182 
130472 
145303 
171995 

0,2080 
0,1756 
0,2062 
0,1643 
0,1163 
0,1166 
0,1369 

Source: EUROSTAT  (COMTRADE) 
Note: Share in per cent of total imports 
EU15: 1995 EUROSTAT (COMEXT) 

?i 

IMPORTS OF MANUFACTURED GOODS FROM LEAST DEVELOPED COUNTRIES 

European Community  (15) 

US 

Value(000  Ecu)  Share(%) 

Value(OQO Ecu)  Share(%) 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

JAPAN 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

2216127 
2058076 
2035229 
2459246 
2690863 
2979195 
3427255 

0,8477 
0,7586 
0,6809 
0,8181 
0,8500 
0,8538 
0,9394 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

CANADA 

958971 
884882 
821180 
954470 
1119112 
1222489 
1349103 

0,2878 
0,2995 
0,2674 
0,2949 
0,2812 
0,2690 
0,2900 

Value(000 Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

36090 
43251 
42501 
41999 
43748 
55253 
61514 

0,0449 
0,0550 
0,0509 
0,0529 
0,0459 
0,0484 
0,0451 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

33259 
42108 
37900 
42464 
51036 
59435 
72430 

0,0394 
0,0575 
0,0490 
0,0550 
0,0554 
0,0574 
0,0696 

Source: EUROSTAT 
Note: Share in per cent of total imports of sector) 
Manufactured Products: SITC Headings 5+6-68+7+8 
EU15: 1995 EUROSTAT (COMEXT) 

tf 

TEXTILES AND CLOTHING IMPORTS FROM LEAST DEVELOPED COUNTRIES 

European Community  (15) 

US 

Value(000 Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

JAPAN 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

438971 
546437 
811747 
899235 
1157041 
1299428 
1492743 

1,4784 
1,6513 
2,0837 
2,2591 
2,6996 
2,8477 
3,3865 

627957 
649156 
645131 
807717 
978702 
1085350 
1164889 

2,1325 
2,4524 
2,2824 
2,5470 
2,5778 
2,6729 
2,9410 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

CANADA 

Value(000 Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

13666 
14528 
13949 
17577 
16069 
17686 
20704 

0,1130 
0,1441 
0,1260 
0,1485 
0,1139 
0,1030 
0,1094 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

21373 
31024 
28346 
35463 
43200 
51204 
63091 

0,5189 
0,8382 
0,7583 
0,9312 
0,9682 
1,1207 
1,4000 

Source: EUROSTAT 
Note: Share in per cent of total imports of sector) 
Textiles and Clothing: SITC Headings 65+84 
1995 Data not available for EU (15) or Japan 
EU15: 1995 EUROSTAT (COMEXT) 

dQ 

AGRICULTURAL IMPORTS FROM LEAST DEVELOPED COUNTRIES 

European Community  (15) 

US 

Value(000  Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

2316272 
1938796 
1685524 
1560369 
1557512 
2027531 
2762421 

3,9840 
3,5026 
2,9719 
2,7881 
2,8308 
3,1549 
4,3018 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

CANADA 

415342 
285059 
261501 
236171 
260658 
336454 
262060 

1,3094 
1,0054 
0,8987 
0,7899 
0,7421 
0,8877 
0,7170 

Value(000 Ecu)  Share(%) 

Value(000 Ecu)  Share(%) 

639325 
424167 
431211 
434148 
523323 
607642 
629270 

1,4352 
1,1207 
1,0568 
1,0526 
1,0662 
1,1047 
1,1535 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

41767 
28256 
28258 
22578 
26311 
26625 
31213 

0,5813 
0,4264 
0,4020 
0,3261 
0,3232 
0,3046 
0,3686 

1989 
1990 
1991 
1992 
1993 
1995 
1994 

JAPAN 

1989 
1990 
1991 
1992 
1993 
1994 
1995 

Source: EUROSTAT 
Note: Share in per cent of total imports of sector 
Acriculture: SITC Headings 0+1+21+22+231+24+261+ to 265+268+29+4 
EU15: 1995 EUROSTAT (COMEXT) 

«2? 

ANNEX V 

Liberalising agricultural trade with the LLDCs:  identification  of exceptions 

Difficulties  in defining exceptions 

The initial problem is that the precise level and scope of protection currently levied on 
EC  agricultural  imports  is not  readily  available. DG VI have  spoken  of  around  5000 
tariff  headings  on  which  some  form  of  protection  exists.  Under  a  number  of  these 
lines there is little or no trade, but this is not to say that the LLDCs can not alter their 
production  structure  overtime  and  an  incentive  for  this  to  happen  may  be  given  by 
some degree of liberalisation. 

A good  example  of  this  is manioc. A reduction  in duty occurred  during  the Kennedy 
Round  negotiated  by  Brazil,  which  has  never  been  a  significant  exporter.  EC  firms 
sought  to  maximise  the  concession  by  exploiting  alternative  centres  of  production. 
Thailand  was  targeted  and  rapidly,  through  the  right  kind  of  investment,  notably  in 
infrastructure  including port facilities, became a major exporter to the EC.  As a result 
of  the  rapid  increase  in  EC  imports  in  the  late  1970s,  an  auto  limitation  agreement 
with the Thai government had to be negotiated. 

This  illustrates  the  difficulties  in  measuring  potential  for  individual  products,  crops 
never grown before can be cultivated  and export patterns change.  This is an argument 
for  sensible  safeguards  to  protect  individual  sectors  of  the  market  rather  than  to 
oppose liberalisation  in general on the grounds that our markets might be flooded:  it is 
clear  that  LLDCs  do  not  have  the  capacity  to  rapidly  increase  their  share  of  total 
agricultural imports. 

Identification  of potential problem products 

Any attempt to identify  products for  any list of exemptions must take into account the 
productive  potential  of  the LLDCs  and  market  conditions  in Europe.  With  regard  to 
the  former,  little  general  information  is  readily  available.  The  data  used  in  this 
exercise  were  taken  from  the  UNCTAD  commodities  yearbook,  the  standard 
sourcebook  for  this type of  information.  Even  here data  are not  complete  and  so the 
analysis  is  by  no  means  exhaustive  (15  sectors  are  covered  for  which  there  were 
consumption  and/or  production  data).  However,  it does  give  a general  indication  of 
product areas which should be investigated  further. 

The  analysis  is  based  around  a comparison  of  total  LLDC  consumption,  production 
and  exports  (to  the  world)  with  total  EC consumption  production  and  imports  (from 
the world). 

Obviously any analysis will be quite crude but will give a general indication of sectors 
where there may be potential problems. 

Zf 

Clearly no problems  are likely to exist  in the 8 sectors where there is no or  effectively 
no EC production  as these  sectors already have very low  levels of  protection:  coffee, 
cocoa beans, tea, pepper, groundnuts, palm kernels, palm oil, and copra. 

Three of the remaining sectors have both consumption  and production  data available: 

Bovine meat:  While the EC is a net exporter,  imports  are at a reasonably  high  level, 
equivalent  to 20% of  total  EC production.  Total  LLDC production  stands  at about a 
quarter  of  total  EC  consumption  and  at  first  glance  this  suggests  some  scope  for 
LLDCs to expand their exports.  Not withstanding the fact  that LLDC consumption  is 
28%  higher  than  production  an  increase  in  production  could  result  in  increased 
exports  to  the  EC-.  This  would  be  the  case  if  the  LLDCs  could  export  the  "high 
value" cuts  and  keep  the  rest  of  their  production.  This  would  enable  then  to  import 
cheaper cuts from  other sources to meet domestic demand. 

Bananas:  The  EC  is  a  large  importer  and  EC  production  is just  over  10%  of  EC 
consumption.  LLDCs  consume  as  much  as  they  produce  and  currently  export  very 
little.  Liberalisation  in the sector could see trade with EC increased. 

Sugar:  LLDC  consumption  of  sugar  is  significantly  higher  than  LLDC  production. 
This  suggests  less  scope for  export  potential  than  would  be the case  for  bovine  meat 
even though the EC imports considerable amounts of sugar. 

For the remaining five products no consumption  figures  are available and any analysis 
must therefore be even more tentative. 

Wheat:  The  EC  imports  a  quantity  of  wheat  equivalent  to  less  than  5%  of  EC 
production,  this  combined  with  the  very  limited  production  of  wheat  in  LLDCs 
suggest little if any scope for increasing exports to the EC. 

Rice:  The  EC  is  again  a significant  importer  of  rice  and  the  LLDCs  produce  vastly 
more rice than the EC.  Very considerable scope for increasing exports. 

Vegetable  oil  seeds  and  vegetable  oil.  EC  is  again  a  large  scale  importer  with 
substantial  production  of  its own. LLDCs produce  about  half  as much  as the EC and 
current exports are very limited.  Without data on LLDC consumption  it is difficult  to 
be  catagoric  but  potentially  LLDCs  might  be  able  to  expand  imports  to  the  EC  in 
direct  competition  with  EC  producers.  While  vegetable  oil  seeds  already  enter  duty 
free  the  same  is  not  true  of  vegetable  oil.  This  is  therefore  a  sector  where  more 
detailed  research  is  required  although  it  should  be  noted  that  EC  industry  favoured 
during the Uruguay  Round  a "zero for  zero" in vegetable oil, an offer  finally  rejected 
by the US 

Soybeans:  Similar analysis to that for  vegetable oilseeds However, trade in  soybeans 
and soymeal derived from  the beans, is already duty  free. 

lc\ 

Conclusion 

Three  of  the four  products  mentioned  as being  sensitive  are considered  in  the  above 
analysis.  Of the three rice has clear export potential  and  so do bananas.  The case for 
Bovine  meat  to  be  included  is  rather  less  clear  cut.  Its  classification  as  a  potential 
problem product, as indeed with bananas (and manioc which is not considered here) is 
as much  to do with  the political  sensitivities  which  surround  the product  as with  any 
economic  considerations.  The  analysis  also  suggests  that  vegetable  oil  might  also 
have to be included  on any list of exemptions  and possibly  sugar  although  a more in-
depth analysis would be required before a definitive decision could be taken. 

The conclusions  drawn  here are both  partial  and general.  However,  they  do  indicate 
the  sectors  which  might  have  to  be  included  in  any  list  of  excluded  products. 
Effective  protection  against  unforeseen  surges  in  imports  as  a  result  of  LLDCs 
revising  their  productive  capacity  can  only  be  provided  by  an  adequate  safeguard 
mechanism.  If the granting of preferences  to LLDCs is on an autonomous basis, such 
a mechanism, would as a matter of course be built into the preference package. 

3d 

LLD 

C-EU Trade Potenti 

al (1993 figures) 

1 
j Production 

| (000 MT) 
j 

LLDC 

Consumption 

Exports 

(000 MT) 

^000 MT) 

Production 
(000 MT) 

J 
j 
I 
| 
! 

i 
I 

i 

1670 

2147 

4610! 
: 

57382 i 

' 
5686 

- 

- 

. 

• 

1638 

j 

j 

! 
5693 

- 

4 

2855 j 

70112462 BAGS 

I 

54 

146 

4,4' 
. 
2655 

2978! 

244 

i 

236 

222 

424 

313 

185.6 unman 

I 
; 

65,8 

| 
' 
160  $mn 

| 

i 

' 

i 

! 

i 

j 

3,6 

9,3 

212,7 

2,5 

147,3 

463,3 

38,7 

110,3 

2,1 

22,2 

7,4 

66,3 

15,4 

33,2 

117,3 

COMMODITY 

[ 
Bovine Meat 

Wheat 

Rice 

Bananas 

Sugar 

Coffee 

Cocoa Beans 

Tea 

Pepper 

Veg oilseeds 

Groundnuts 

Soybeans 

Copra 

Palm Kernels 

Palm Oil 

Tobacco 

0 

0 

0 

5594 

5 

734 

1 

0 

0 

ANNEXV 

EC 

Consumption 

1 

— 

Imports 

(000 MT) 

-

LLDC 

cons/prod 

EC 
con/prod 

LLDC prod 

imps/prod 

/EU cons (i) 

7347 

1624,70 

128,56 

91,84 

20,31 

22,73 

17136,7 

1493,7 

21,16 

5,69 

76,84 

2951,75 

3699 

13116 

3973,6 

100,12 

902,20 

969,17 

153,72 

3028,2 

174,30 

78,95 

18,23 

12,49 

-

8000 

80978 

1944 

410 

16614 

0 

31699 BAGS 

2237,6 

1049,9 

no prod 

no prod 

no prod 

no prod 

295 

45,07 

no prod 

no prod 

54,3 

no prod 

no prod 

6,22 

65,44 

47,46 

868,4 

223,1 

8599.2  $mn 

508,6 

13403,7 

65,7 

34,5 

10172,00 

59560,00 

1826,12 

33,24 

6570,00 

23600,00 

no prod 

no prod 

1735,5 

no prod 

no prod 

396 

702.4 unman 

553,2 

139,70 

Source UNCTAD cor 

nmodities Yearbook 1995 

! 

Page 1 

(i) production figures used where possible when consumpton figures were not available.  Blank indicates no data 

AlMNfcAV 

CO 

Page 2 

ISSN 0254-1475 

COM(97) 156 final 

DOCUMENTS 

EN 

11 

Catalogue  number  :  CB-CO-97-159-EN-C 

ISBN  92-78-18726-7 

Office  for Official  Publications of the European  Communities 

L-2985 Luxembourg 

-a